Tax changes in the Netherlands per 1 January 2015

Please find below an overview of the main changes.

Corporate income tax

Tax rates

The Dutch corporate income tax rates for 2015 are the same as for 2014.
For an overview of the current tax rates please follow this link.

Tax liability for government owned enterprises

Under the current legislation government owned enterprises are in most cases exempt from corporate income tax. Effectively 1 January 2016 Dutch legal entities under public law (government owned enterprises) will be subject to corporate income tax to the extent that they carry on an enterprise. The individual enterprises of central government will also become taxpayers. Exceptions apply, for example for academic hospitals, educational institutions and seaports.

Foreign fines non-deductible

Under current law only penalties and settlement paid to the Dutch state or to European institutions are non-deductible. As from 1 January 2015 foreign fines will also no longer be deductible for Dutch corporate income tax purposes. The restriction on deduction applies to all fines, including the fines imposed under criminal law, disciplinary law and administrative law as well as settlements concluded with foreign governments. If a penalty is imposed abroad for an offense that is not recognized as such by the Dutch legal system and which is clearly in conflict with Dutch law, consideration will be given to allowing deduction of the penalty imposed on the basis of the “hardship clause”.

Interest deduction for Tier 1 capital

Under European Directives insurance companies and banks have the obligation to maintain a certain minimum capital. This may include certain subordinated loans, which for application of these Directives may be qualified as Tier 1 capital and on the basis of Dutch tax laws as equity for tax purposes. It is proposed that as of as of 1 January 2014, interest paid on (hybrid) Tier 1 capital instruments will be tax deductible for banks. This will also be applicable for insurance companies as of 1 January 2015. The interest paid on these debt instruments will be tax deductible at the level of the bank/insurance companies under certain conditions and is taxable at the level of the (Dutch) recipient.

Lower budget for R & D facility

The budget for 2014 was €302 million and will for 2015 be reduced to €238 million.

For the year 2015 the wage limit as well as the rate for the first and second brackets remains the same as in 2014.

Dutch fiscal unity regime for (indirectly) foreign owned Dutch group members

It has been announced by the state sectary that the Dutch fiscal unity regime will be amended in such a way that, under certain conditions the formation of a fiscal unity between a Dutch parent and (foreign owned) Dutch sub-subsidiary or between (foreign owned) Dutch sister companies will be possible. This is currently already possible on the basis of recent case law and published policy.

Participation exemption: ringfencing reserves

On 30 August 2013 a bill on ringfencing reserves was presented to Dutch Parliament. This Bill contains new rules for the ringfencing of reserves for the application of the participation exemption for corporate income tax purposes. This Bill is a reaction on the Dutch Supreme Court judgement dated 14 June 2013. It is expected this this Bill will be enacted in the course of 2015.

Wage tax

Tax rates

The wage tax rates are based on the Dutch income tax rates. For an overview of the Dutch income tax rates per 1/1/2015 please follow this link.

Work-related Cost Scheme becomes obligatory

As of 1 January 2015 employers are obliged to apply the Work-Related Costs scheme (“Werkkostenregeling” or “WKR”). Under the WKR virtually all reimbursements paid and benefits provided to employees will be regarded as taxable wages. Specific exemptions and specific valuations apply for certain benefits and allowances. Employers can reimburse a fixed percentage of the total gross yearly wages for employee benefits and allowances. For 2015 this percentage is set at 1.2% (2014: 1.5%). To the extent the total employee benefits/reimbursements exceed this percentage, the employer is charged for 80% wage tax over the excess.

Please follow this link for more detailed information about the WKR: The Work-Related Expense Scheme (WKR) obligatory per 1 January 2015

The minimum salary rule for substantial shareholders adjusted

If a tax payer works for a corporation in which he/she holds a qualifying substantial interest (holding alone or together with some close relatives, directly or indirectly 5% or more of the shares), the law provides that the tax payer must report a certain amount of minimum salary. As of 1 January 2015 this minimum salary must match the salary of a normal employee with “the most comparable employment” activities instead of similar employment activities. Also the permissible margin will be reduced from 30% to 25%. Hence, the director’s salary to be reported for the director/substantial shareholder should, as a general rule, at least amount to 75% of the salary of the employee with a comparable employment function.

Tax facilitated release life-course savings

Since 1 January 2012 the life-course savings scheme has been abolished. In 2013 a tax facilitated release was possible, implying that upon release of the full amount only 80% of the released amount was subject to tax. This facility will also apply in 2015 but for no more than the amount of the life-course entitlements on 31 December 2013. This facility will finally expire on 1 January 2016.

Limitation tax deduction pension plans

Effective 1 January 2015, employee pension plans must comply with certain additional conditions for the premiums to be exempt from the levy of wage tax. This particularly relates to the following:

• a retirement age of 67 years,
• the maximum accrual percentage under a final pay plan will be 1.657% per year of service and 1.875% per year of service under an average salary plan.
• the maximum pensionable salary for employee pensions will be capped at EUR 100,000 (less the state pension discount).

Pension plans which do not meet the new conditions will lose their tax facilitated status and the tax relief already obtained for the accrued pension rights may be reversed (which could result in additional wage tax levy of 72% over built up pension rights, including 20% interest).

Wage tax reduction for contract R & D by non-profit institutions abolished

Under the current regime, non-profit institutions like universities and hospitals, can be eligible for the wage tax reduction for qualifying contract R & D. Effectively 1 January 2015, this possibility will be abolished and only the principal party in the contract R & D can be eligible for the R & D wage tax reduction if it conducts and enterprise.

Declaration of Independent Contractor Status (“VAR”) to be replaced by “Exemption from Payroll Tax Withholding” (the “BGL”)

Under the current regime, principals who work with independent contractors, can consider themselves protected (within certain limitations) against the obligation to withhold wage tax and social security premiums from payments made to independent contractors (like “zzp-ers”), when the independent contractor can provide a so-called VAR –Statement.

It has been announced that the mechanism of the VAR statement is to be abolished and replaced by a mechanism of agreement between contractor and principal about the status of the contractor for the withholding of wage tax and social security premiums. However, no concrete legislation to effectuate this has been implemented yet.

Personal Income tax

Tax rates

For an overview of the Dutch income tax rates per 1/1/2015 please follow this link

Optional scheme for non-resident taxpayers abolished

Until 1 January 2015 a non-resident taxpayer could opt for Dutch residence status for the levy of Dutch income tax (making him/her eligible for certain tax deductions, tax credits and tax allowances). As from 1 January 2015 this is no longer possible. For residents of EU Member States, the European Economic Area (EEA), Switzerland or the BES islands who earn 90% or more of their income in the Netherlands can still qualify as non-resident taxpayers.

Tax credits and tax allowances in case of partial tax liability during the year

Until 1 January 2015 a tax payer who was not a resident taxpayer during the entire calendar year would not be entitled to certain tax credits. As from 1 January 2015, the tax credits will be granted in proportion to time for the period in which the taxpayer is a resident or qualifying non-resident taxpayer.

Interest on residue mortgage primary residence deductible for 15 years

Effective 1 January 2015 the maximum period for deduction of interest and expenses on residue mortgages for a previous primary residence is extended from 10 years to 15 years.

Interest deduction for unsold previous primary residence

Effective 1 January 2015 (double) interest deduction for a previous primary residence which has not been sold yet, is possible for a maximum of 3 years.

Elderly person's allowance for savings and investments abolished per 1 January 2016

In 2015 elderly taxpayers can still benefit from the elderly person’s allowance in box 3. The elderly person’s allowance is a maximum increase of € 27,984 of the tax-exempt wealth. This allowance will be abolished per 1 January 2016.

Net pension plan

With effect from 1 January 2015, it is no longer possible to accrue a pension above a pension base of € 100,000. However, employees and self-employed people without staff (zzp-ers in Dutch) can independently make a contributions to an individual pension saving plan. The contributed amounts will not be tax deductible but under certain conditions the built up capital will be exempt in Box 3 (income from investments and savings).

Conditions for surrender of net annuity

Under certain conditions it will be possible to withdraw a fiscally facilitated annuity, in full or in part, before its maturity without incurring deemed interest (20%) in the event of long-term incapacity to work.

VAT

Tax rates

The Dutch VAT rates for 2015 are the same as 2014. For an overview of the current tax rates please follow this link

New VAT rules for digital services in the EU

As from 1 January 2015 the rules on telecommunications, broadcasting and electronically supplied services (digital services) will change.

Per that date the abovementioned services will as a general rule be subject to VAT in the country of residence or establishment of the customer. It does not matter if the customer is a private individual or entrepreneur or whether the customer resides in or outside the EU!

For more detailed information about this topic, please follow this link:New VAT regime for E-services and introduction of the MOSS scheme.

6% VAT on renovation

As a stimulus for the housing market and the building sector, particular renovation and repair work is currently covered by the reduced 6%VAT rate. This concerns work on private homes. The reduced rate to the renovation work was originally to end on 1 January 2015, but has now been extended to 1 July 2015

Refund VAT to third party

As from 1 January 2015 VAT refunds can be made to a bank account in the name of a person other than the tax payer who is entitled to the refund. This is currently also possible on the basis of a recent approval by the State Secretary.